Chronic hepatitis B virus (HBV) infection is an incurable pathogen responsible for causing liver disease and hepatocellular carcinoma. During the genesis of infection, HBV establishes an independent minichromosome consisting of the viral covalently closed circular DNA (cccDNA) genome and host histones. The viral X gene must be expressed immediately upon infection to induce degradation of the host silencing factor, the Smc5/6 complex. However, the relationship between cccDNA chromatinization and X gene transcription remains poorly understood. By establishing a reconstituted viral minichromosome platform, we found that nucleosome occupancy in cccDNA regulates X transcription. We corroborated these findings in situ and further showed that the chromatin-destabilizing molecule CBL137 inhibits full-length X transcription and HBV infection in primary human hepatocytes. Our results shed light on a long-standing paradox and represent a potential therapeutic approach for the treatment of chronic HBV infection.